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Headwinds to a recovery.

|Includes: Bank of America Corporation (BAC), C, GS, JPM, WFC

I personally believe that we will not have a sustained recovery for years, unless there is some new technology that comes along, or that somehow, the world can decouple from reliance on the American consumer. The third possibility to recovery is major war, but then if nukes are flying about can we really find solace in the recovery WW3 would bring? 

There are some tensions that I see that weren't present in the Great Depression that will make our recovery difficult. The US is in massive debt, as a debtor nation, with a need to sell treasury bonds. The tension between wanting to stimulate to recovery and the need to sell treasury bonds is a tension surely weighing on the Federal Reserve. I am not sure that they can pull both agendas off at the same time.

The Fed has another tension that did not seem to be an issue in the Great Depression. That tension is between stimulating the economy and creating asset inflation. Natural resources were plentiful, and according to people I have spoken with, while money was very tight in the Great Depression, prices were very low. We are facing tight money and high prices. That seems to be much worse than what was taking place in the Great Depression.

The government has a tension that must be maddening to the likes of Larry Summers and Obama and Geithner. I must admit that to watch him, Larry Summers looks like a man without a worry in the world. He is convinced that decreased searches on the internet for "economic depression" means that we have no big issues too big to overcome. I want what he is smoking.

The government tension does not go away because Larry Summers is a pollyanna! That tension is that unemployment benefits are running out. The modern day equivalent of the soup line is unemployment benefits. But how much money does the government need to borrow to supply these folks with a good meal and a roof over their heads. It seems that we have spent too much already on the banks who contribute nothing to the success of these folks. This is an aweful tension within the government.

While America is not the worst of the debtor nations, and certainly the international bankers believe we can take on more debt to their advantage, we still are falling dangerously into debt. As this recession drags on and on, with years of high unemployment facing us, the costs will skyrocket. Either consumer spending will contract a little (as long as folks get benefits) or consumer spending will contract a lot as  the haves help their family members who have exhausted their unemployment benefits, food stamps, etc. 

You Seeking Alpha readers are welcome to cheer me up, but I don't see a pleasant outcome based on these tensions and the possible permanency in the loss of jobs that we now see.